The sell-off in Indian stocks is primarily technical in nature and reflects multiple compressions rather than any drastic macro issue, according to a recent report of 'Greed & Fear' by Jefferies.
The sell-off is more painful as compared with the nifty benchmark index, because of the much bigger decline in the small and mid-cap stocks where multiples are much higher.
"In India for the first time since the stock market started to correct properly, GREED & fear's base case is that the sell-off is primarily technical in nature reflecting multiple compression rather than any drastic macro issues."
Aggressive selling by foreign portfolio investors (FPIs) is a major driver for the recent stock market fall in India, but it's concentrated in more high beta cyclical sectors.
Market participants and domestic fund managers say that the retreat from domestic cyclicals is now rationalised. The demand in the economy will increase because of the populist measures announced by the Modi government in its third term. -- ANI
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